On Friday, July 9, 2021, President Biden signed a sweeping Executive Order with the stated purpose of seeking to increase competition in the American economy and counter corporate consolidation. 1 The Executive Order is a further signal that the Biden administration intends to take an aggressive view of federal antitrust laws, with the intent of increasing competition in the labor market. Specifically, the Executive Order directs the Federal Trade Commission to issue rules curtailing the "use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility." 2 As we discuss below, the new Executive Order is an extension of the existing trend of enforcement against other restrictive agreements like anti-poaching agreements. Employers should consider what actions they should take to prepare for possible regulatory changes.
The Biden Administration Indicates Antitrust Enforcement in the Labor Market is a Top Priority
In light of the widespread proliferation of restrictive covenants in employment contracts, the Executive Order's provisions relating to non-compete agreements will affect many employers. According to the White House, approximately half of employers enter non-compete agreements with at least some of their workers. 3 A 2019 study from the Economic Policy Institute (EPI) estimated that between 36 million and 60 million workers are subject to non-compete agreements. 4 Moreover, the EPI found evidence that use of such agreements is growing. 5
The White House takes the position that non-compete agreements are a barrier for workers to change jobs to better-paying options. 6 The government contends that banning or limiting non-compete agreements will make it easier for workers to change jobs and obtain higher wages. 7
Although we will not know the full impact of the Executive Order until the Federal Trade Commission issues updated rules, we expect the government will closely examine non-compete agreements and will ban them in many circumstances, particularly with low wage workers where there may be limited justification for imposing non-compete agreements. The Executive Order also creates a White House Competition Council, consisting of over half of the cabinet secretaries, to coordinate the federal government's response to allegedly unfair competition. The fact that the Council has so many cabinet members underscores the seriousness with which the Biden administration is making antitrust enforcement and expansion a priority. 8
The Executive Order Continues the Trend of Government Action against Non-Competition Agreements
The broad reach of the Executive Order signals a continued focus on what the federal government views to be anti-competitive actions in the labor market; this focus began during the Obama administration and continued during the Trump presidency with prior policies addressing anti-poaching and anti-solicitation agreements among competitors
Footnotes
1 Executive Order on Promoting Competition in the American Economy, (July 9, 2021), https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/.
2 Non-Competition EO § 5(g).
3 White House, Fact Sheet: Executive Order on Promoting Competition in the American Economy (July 9, 2021), https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/.
4 Alexander J.S. Colvin & Heidi Shierholz, Econ. Policy Inst. Noncompete Agreements (Dec. 10, 2019), https://www.epi.org/publication/noncompete-agreements/ (noting the American workforce in 2019 included approximately 130 million people).
5 Id.
6 Fact sheet, supra note 3.
7 Id.
8 Non-Competition EO § 4.
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